Is North Korea experimenting with economic change?

Published September 13. 2012 12:01AM

By TIM SULLIVAN Associated Press

Pyongyang, North Korea - Deep in the North Korean countryside, in remote villages that outsiders seldom reach, farmers are now said to be given nearly one-third of their harvests to sell at market prices. Collective farms are reportedly being reorganized into something closer to family farms. State propagandists are expounding the glories of change under the country's new young leader.

In the rigidly planned economy of this Stalinist state, could this be the first flicker of reform?

A string of long-doubtful observers have become increasingly convinced that economic change is afoot, akin to China's first flirtations with market reforms 30 years ago.

But, they also warn, exactly what is happening remains a mystery.

No outsiders are known to have been to the villages, in Ryanggang province, since the new policies reportedly went into effect. No outsiders have seen the details of the June 28 government order - "On the Establishing of a New Economic Management System in Our Own Style" - that supposedly launched the program. Other reported reforms, from shifts in investment laws to new industrial profit-sharing regulations, are even more opaque.

Still, there are undeniable signs that the world's most closed-off society may be toying with change, from a carefully scripted campaign to soften the image of the country's young leader, Kim Jong Un, to the apparent purging of a hard-line general and a series of often-cryptic official statements hinting that Pyongyang is serious about liberalizing its economy.

Something new

"My gut sense is that something is changing," said Marcus Noland of the Washington, D.C.-based Peterson Institute for International Economics and a leading scholar on the North Korean economy. Kim Jong Un "is trying to do something new."

"Whether that succeeds or not is a completely different issue," he added.

Like many other analysts, Noland remains pessimistic. The economic reforms appear to be very limited, he noted, and could quickly be abandoned if Kim changes his mind or faces opposition from his core supporters.

North Korea has flirted with radical economic shifts before. The 17-year rule of Kim Jong Il - whose December death paved the way for his son, Kim Jong Un, to take power - included market experiments in 2002 and a devastating currency devaluation in 2009 that stripped millions of people of their savings. Nearly all the changes were rolled back amid internal disputes, and fears among the ruling elite that they could lead to demands for change that could spiral beyond the state's control.

Some change did quietly occur. Faced with an economy on the verge of collapse, the elder Kim's regime eventually allowed small-time markets to take root. After reportedly suffering a stroke in 2009 and picking his youngest son as his heir, Kim Jong Il announced a renewed focus on the economy and made a push to draw foreign investment and trade, particularly from China, North Korea's closest ally.

Driven by China

If the latest reform reports are true, they would almost certainly be driven in part by China. Beijing has long pressed Pyongyang to enact reforms similar to its own first steps toward a market economy.

For years, "the Chinese have been touting their system and their accomplishments, and the North Koreans have been politely nodding their heads and effectively doing nothing," said Evans Revere, a former U.S. diplomat with extensive contacts in the Koreas and China.

But with Pyongyang facing a series of major challenges - dire economic straits, international isolation and a transition to the third generation of Kim family rule - Beijing officials now believe North Korea is serious about change, he said.

What is not clear, Revere added, is whether Kim Jong Un is simply telling the Chinese what they want to hear, or if they truly intend to follow through.

And Kim himself? Since coming to power, he and his inner circle have crafted an image that carefully differentiates the new leader from his father, a distant man who turned North Korea into a nuclear power and a pariah state as its citizens sank into desperate poverty.

The younger Kim has appeared on television with his young wife and had his photograph taken on amusement park rides. His haircut and clothing mimic that of his grandfather, the country's still-revered founder, Kim Il Sung. He has visited the homes of everyday North Koreans, and slapped the backs of young soldiers.

He has also vaguely alluded to the country's economic problems, saying in his first speech, in April, that North Koreans should never have to "tighten their belts again."

But when the reports began leaking out in recent weeks about the agricultural reforms, the government response made few things clear.

An unidentified government official told the state news agency KCNA that expecting reform "is nothing but a foolish and silly dream," but added that North Korea "is effecting new innovations and creations in order to make its people enjoy modern and a highly civilized life and live in luxury and comfort."

Some of the contradiction may simply be semantics, with North Korea objecting to the word "reform" because it could look like a rejection of the policies of Kim Jong Un's father and grandfather, both of whom are officially worshipped as near-deities.

But the reported agricultural reforms, detailed mostly by South Korean news outlets and based on anonymous sources inside North Korea, are the clearest sign that significant economic change could be at hand.

Agriculture is the fragile backbone of the North Korean economy. Though less than 20 percent of the mountainous country is arable, nearly every patch of land that can be farmed - including some parts of the capital - is planted with rice, corn, potatoes, cabbage and more. Tractors and the fuel to operate them remain a luxury, so most work is done by hand and with the help of oxen.

On a typical collective farm, hundreds of families occupy small, identical cottages with courtyards where each family maintains a garden. On country roads across the nation, farmers can be seen hauling their crops to market, some on the back of ox-pulled carts, others on the backs of bicycles.

The reports say communal farmers in selected villages are now being given 30 percent of their harvests to sell on the open market - tripling the amount they had earlier been allowed.

In addition, the farms' so-called work units have reportedly been reduced in size, with the labor teams cut from 10-25 people to as few as four.

If that seems like a regulatory technicality, analysts say the combination of those two changes could have immense impact, dramatically driving up agricultural production by effectively giving individual families control over sections of communal farms, and creating a profit incentive for them to produce as much as possible.

Political reform, though, is something few observers see.

North Korea is still a police state where contact with foreigners is forbidden without official permission and where rights group say well over 100,000 political prisoners are sealed off in sprawling camps.

And amid the public relations campaign for the new leader and the rumors of economic reform, rights group have noted one other change: Since Kim Jong Un took power last year, they say North Korea has dramatically ramped up security along the Chinese border. As a result, the number of North Koreans able to flee to China has dropped by nearly one-half compared to the year before.

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Associated Press writer Jean H. Lee contributed to this report.

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